Tiny School, Huge Surplus

The Wainscott School District has been criticized in a state audit for amassing a budget surplus of $2.4 million, an amount that is 68 percent of its current budget and 17 times more than allowed by law.

The audit, conducted by the office of the state comptroller, determined that the district had consistently overestimated expenses and underestimated revenues dating back to July 1, 2007, and excoriated it for increasing the property tax levy by an additional $325,000 during that same period. In addition, auditors found fault with the district for failing to develop a multiyear plan to address the problem of its growing surplus.

On Monday, David Eagan, the school board president and an East Hampton attorney, said the district recognized that some “rebalancing” had to be done, but took issue with the state’s findings, saying that the district does have a five-year plan in place to reduce both the surplus and taxes.

“This was no conscious effort to hoard money at the expense of the taxpayers,” he said, explaining that Wainscott typically budgets for unexpected increases in the number of students and has seen its enrollment swing with changes in the house rental market.

Mr. Eagan said the state law that limits the amount of surplus a district can have on hand to no more than 4 percent of its budget was misguided and “arbitrary,” in that it does not suit the needs of a small district like Wainscott.

The district educates students in kindergarten through third grade in its own school and pays tuition for its older students to the East Hampton schools. Tuition costs range from about $25,000 for the majority of students to upward of $60,000 for those in special-education classes. Because of a fluctuating population, Mr. Eagan said it was difficult to predict how many students to budget for in any given year.

Under state law, Wainscott would have been allowed to have a surplus of about $140,000 this year, an amount Mr. Eagan said could have been easily exhausted if more than two special-needs students had moved into the district.

In a written response to the comptroller’s findings, Mr. Eagan stated, “Based on our unique circumstances, we cannot ascribe to the one-size-fits-all approach that is reflected in the report, and we fundamentally disagree with the report’s characterization of our budget estimates as being ‘unrealistic’ and ‘misleading.’ ”

On Monday, he said the district would continue managing its finances as it saw fit, noting that for the past two years it has reduced its budget — “the cumulative percentage was the largest we’ve seen on Long Island” — and would continue to do so until it reduced the surplus to a more reasonable level.

He added that school board members were not worried about the state taking action against the district because typically the punishment comes in the form of a reduction in state aid. Since Wainscott receives less than 1 percent of its budget in aid, any reduction would have a minimal impact, he said.

Mr. Eagan said the school had recently built an addition and also absorbed a 33-percent hike in East Hampton tuition rates, and still managed to stay within the state-mandated 2-percent tax cap.

“We don’t have programs and staff to cut like other districts,” he said. “We have a smooth tax rate that is the lowest among the sending districts. I think our taxpayers appreciate what we do.”